IMF cuts China’s growth forecast

Published On: 6 June 2019

Annette Nguyen, Business & Policy Intern

Citing trade tensions, the International Monetary Fund (IMF) has cut China’s 2019 GDP growth forecast to 6.2 per cent from 6.3 per cent, merely two months after a raise of 0.1 per cent on the then-brightening prospects for a trade deal with the US.

The downgrade came after the fund paid a visit to Beijing and Guizhou for intensive discussions with policymakers during its annual assessment of the country’s economic and financial health. “Growth is expected to moderate to 6.2 per cent and 6.0 per cent in 2019 and 2020, respectively,” the IMF’s Deputy Director David Lipton said in a statement.

The fund said that additional policy easing would be warranted if the trade tensions escalated further, which would put the economic and financial stability of China at risk. China could roll out other fiscal expansion to stabilise the economy under a worse trade scenario, the fund said, while also highlighting that such expansion should be financed by the central government and target low-income households.

“The near-term outlook [of the Chinese economy] remains particularly uncertain given the potential for further escalation of trade tensions” Lipton said, adding that China’s policy stimulus measures announced so far were sufficient to stabilise growth in 2019/20, despite the recent US tariff hike. The fund also stated that no additional policy easing is needed, provided there are no further increases in tariffs or a significant slowdown in growth.

The news came just after President Xi’s remarks on China’s economic confidence, made during an interview with Russian media. Speaking on Tuesday to the state-owned newspaper Russian Gazetteand news agency Tass, Xi said that despite global growth having slowed since the start of the year, China had achieved a steady expansion, Xinhua reported.

“We totally have the resources, ability and confidence to cope with the various risks and challenges [of the trade war],” Xi said, adding that the country’s economic expansion had been “steady and good” and would remain so in the long term.